Medical Debt Suits Plague Courts and Patients—Is There Another Way?

Episode Notes

Transcript

Matt Keenan:

If they’re resigned to a medical debt that they feel like they can’t pay availing themselves of an attorney that they also can’t pay isn’t going to be on the horizon either.

Announcer:

Equal access to justice is a core American value in each episode of Talk Justice, An LSC Podcast, we’ll explore ways to expand access to justice and illustrate why it is important to the legal community, business government, and the general public. Talk Justice is sponsored by the Leaders Council of the Legal Services Corporation.

Ron Flagg:

Hello and welcome to Talk Justice. I’m Ron Flagg, president of the Legal Services Corporation and your host for this episode. Today we’re talking about the growth of medical debt lawsuits, the impact on patients and efforts to respond to the surge in these suits. Let me provide you with a bit of context. I talk a lot about the justice gap and there are lots of reasons for the justice gap. One of them is we don’t fund legal aid sufficiently, but another reason is there’s been an explosion in cases in which one party is not represented, and that namely is consumer debt. Consumer debt collection lawsuits continued to fill state civil court dockets throughout the COVID-19 pandemic, and this more recent trend continues a much longer period, decades really during which debt claims have grown to dominate state civil court dockets. Debt collection suits rose from an estimated one in nine civil suits in 1993 to one in four, just over a decade ago.

In 2013, more recent data from nine states showed that debt cases made up 42% of state civil dockets in 2021. So moving toward 50% of all of the state’s civil cases, at least in those nine states. But they’re disparate enough that I don’t think they’re in any way aberrational. Now we’re focusing in this conversation on one part of consumer debt, but it’s a big part and that’s medical debt. It’s estimated that 15 million Americans are burdened with medical debt estimates of the total amounts in outstanding medical bills in collection range from 49 billion to 200 billion. That’s obviously a wide range, but either end of the range is a big, big number. And research shows that medical debt suits are common. Kaiser Health News studied 500 US hospitals and found that 300 regularly filed debt collection lawsuits against patients and an additional a hundred hospitals were selling patient debt to third party companies who pursued lawsuits.

So a lot of big plaintiffs suing a lot of individual debtors with medical debts and most of them are unrepresented. So to learn about this medical debt issue, we’re joined today by two guests. Matt Keenan is executive director of Kansas Legal Services. Prior to taking this role, Matt served on Ellis’s board of Directors and I enjoyed working with him directly in that role. And Dana Schmidt is manager of mediation programs for the Tennessee Supreme Court Administrative Office of the Courts. Welcome, and thanks to both of you, Matt and Dana. Let’s kick things off with you. Matt, in May, the Wall Street Journal reported about a rural Kansas hospital filing dozens of lawsuits against patients for their medical debt. And to put that in perspective, in a lot of rural areas, they’re relatively fewer lawsuits. So to have dozens being filed by a single plaintiff is a big deal. Matt, could you tell us a little bit about the situation that the article covered and how it lines up with what you’re seeing more broadly at Kansas Legal Services?

Matt Keenan:

Yes, I’d be happy to, and thanks for having me today. The situation that came into my desk really had its genesis about a year ago when I was at the self-Help Center in Wyandotte County and a woman came in who was very upset about being sued for a medical bill that her husband had incurred. And it’s a little bit of work and research I learned about the limitations that Congress put in place for charitable hospitals, charitable hospitals with the Affordable Care Act because they’re charity hospitals and have certain benefits being a nonprofit entity, have limitations on their ability to sue the poor for unpaid hospital bills. And in a very quick period of time, I learned that this could be the tip of a iceberg that really wasn’t fully understood by policymakers here in the state and by the KLS staff that we have here.

And so I instructed our intake center, keep their eyes and ears open for cases like the one that I encountered at the self-help center. And in no time at all had a client from a small town known as Pratt, who was being sued for about a $9,000 medical bill. She was the grandmother of a grandson who had an acute injury and she just happened to take him to the hospital and sign the forms for that particular intake. She lived well below the poverty line and by all metrics would be somebody who would qualify for charity care. This was a nonprofit hospital. This was a charitable hospital in this town. It was the only hospital in the town. And in no time at all, we discovered that this woman was one of about 500 similarly situated local residents who had been in the receiving end of a lawsuit for medical bill collections by that hospital.

So it was intriguing to me. I knew the Wall Street Journal would be interested in the story, and we entered our appearance on behalf of the grandmother and really in no time at all, the case was dismissed without us having to really do anything at all. I think the hospital recognized that she was somebody who would’ve otherwise qualified for free care. They did the right thing, they dismissed the case, but we suspect there are many other patients, former patients in the area that have had judgments entered against them and have had their paychecks garnished and all those things. So we are working to bring greater visibility to this issue across the state.

Ron Flagg:

Well, that’s a great story and it is just another illustration of how legal aid makes a difference. You have a legal right, the woman had a legal right under federal law. She was probably unaware of that, right? Even if she had an idea that it existed, no ability to enforce it. If you have a lawyer, you win. If you don’t have a lawyer, you lose. Dana. Have you been seeing similar patterns in Tennessee? And from your perspective as a court administrator, what impact does this growing volume of medical debt collection cases have on the courts as well as the individuals who are subject to the suits?

Dana Schmidt:

Yes, for Tennessee, this goes back as far as 2019. It came into view the same way as it did in Kansas with the news article. Our statewide newspaper, the Tennessean actually published an article in 2019 and the title was Medical Debt Lawsuits Flooding Tennessee, sending Sick and Port of Court. And I point out this is pre pandemic 2019. So it had been an issue. And in that article the same, it was an elderly lady who she had to have the tests, she didn’t have the insurance. And on top of everything else, she finds herself in court and she’s barely well enough to get to the doctor, let alone to go to the court. And it was just one of many interviews that the Tennesseean conducted in regards to this issue across the state. They also interviewed the judges that deal with the claims. So in Tennessee, we have small claims courts that they can hear up to $25,000 in debt collection cases.

And we think about it, that’s a lot of cases. And so what we saw and we still see is it’s directly impacting the courts because the increased filings, it impacts the court’s ability to provide timely and efficient services to the community. You have delayed docket dates, access to the court, the more cases on the docket, the further out the dates go just to have that first appearance with the judge. And then what I call is the aftermath issues. And I have found myself engaged in these as well. And what I mean by aftermath is aftermath is what happens after the collection agency goes to court, they get a judgment and then they leave. And then what happens is the party, whomever it is that the judgment was ordered against, they may find out that this happened to them when they opened their paycheck and there is a garnishment or things like that.

And so what happens is the aftermath is they go back to the place where they understand this happened, which is the court, right? And they want to speak to the court clerk, the person at the counter processing the paperwork. They don’t have an answer, they just know what the paper says, but they want to talk to someone. They can’t afford an attorney. These are our pro se litigants. And so what happens is there’s this aftermath of back and forth and confusion. And I actually had a lady, I take calls for the court and one day I answered a call and it was this little elderly lady outside of Memphis, Tennessee in rural rural county. And she had gotten the notice of judgment in the mail. And what she knew was is that she owed this money and she was going to have to pay it.

And she was very upset. And how she got forwarded to me, I don’t know, but she did. And so I listened. And her frustration was she didn’t have a way to get to court that day. She was elderly, she couldn’t walk. Well, she knew she owed the bill and she would be happy to pay it, but she didn’t have access to the court. And then she was having trouble getting someone at the court to help her understand how this all happened to her. And so what I did was, and I have the ability is I went through the court and I made calls myself and was able to work with the court clerk and we did some things to help her basically appeal it like what can I do? And again, she’s pro se she can’t afford an attorney, but the clerk was gracious and was like, I understand. And so we were able to basically get the case back on the docket so that she could speak with the judge. But that’s one instance for me. But I know there’s a lot of people out there that aren’t aware that they have those options and they’re very confused and upset.

Ron Flagg:

Well, that’s a great segue to my next question. So what you’re describing happens on thousands of occasions every week, and what we know is in debt collections generally and in medical debt collections in particular, probably more than 90% of the defendants are not represented by a lawyer. They can’t afford a lawyer, they’re in debt. And I’ve seen estimates that 70% of medical debt collections result in default judgments. So as was the case with the lady that Dana was describing who was able to undo the default judgment, but that is a rare occurrence. Matt, what are some of the factors contributing to such a high rate of default?

Matt Keenan:

Well, I think it’s helpful to take a moment here and take a look at what the regulation says in terms of the availability of the financial assistance policies that are required for these charitable hospitals. It requires that the hospitals publicize its financial assistance policy, which includes eligibility criteria, methodology for calculating charges to patients and consequences for nonpayment. And they must provide a concise, clear and understandable plain language summary of their financial assistance policy. So that’s their obligation. How they interpret publicly available varies greatly, and I’ve looked at this pretty carefully. You’ll find some charitable hospitals that will have notices pasted on the wall with large notice when you go in to sign the documents. I’ve seen other hospitals where they will have a brochure off to the side. It’s not nearly as visible. If you go to the websites, you’ll see a lot of variations in terms of where the hospitals place these financial assistance policies.

And so that variability does invite the potential for a large number of these men and women to be unaware of these policies. And so to answer your question more directly, a lot of it is ignorance of these charitable policies. There’s other factors that come into play. A lot of these client populations, they feel guilty that they were in a period of time when they didn’t have insurance. They are not disputing or denying that they received care and in some cases perhaps life sustaining care and they feel guilty and they really are not in a mood to resist or to object or to look for alternatives for paying these debts. When I have explained to them that these are a unique set of institutions that gain the benefit of some tax laws and in return for that, they’re obligated to give charity care. Their mindset changes considerably. But I think its essence, you’re talking about a client population that in some cases has a lot of other issues that they’re struggling with and fighting a medical bill just isn’t on their list of top priorities. So they throw their arms up and they go on down the road is sort of the short answer to it.

Ron Flagg:

How about just the fact that they don’t have a lawyer? If we take a sample of 20 people and 10 of them all 20 are in the same circumstances you just described, 10 of them are able to talk to you and 10 of them are not. I’m guessing that the 10 of them who are not are going to end up with default judgments. What about the 10 that talk to you?

Matt Keenan:

Yeah, I mean there’s no question In the cases that I’ve been involved with simply entering our appearance leveled the playing field to the point where the hospital dropped the lawsuit. And yeah, I mean there’s no question, but if they’re resigned to a medical debt that they feel like they can’t pay availing themselves of an attorney that they also can’t pay isn’t going to be on the horizon either. The availability of civil lawyers, part of it is we need to do a better job of explaining what we do and how we can help them. In the case of the woman that I met at the self-help Center, she was at court for her hearing when she saw our notice there, and that’s how she discovered us. She was actually going to court for her case. We are working very hard to get the word out that we are available and a resource for people who are facing these kinds of challenges, and I think we’re doing a better job. We still have a ways to go.

Ron Flagg:

Well, that’s great. I think that’s true of us in legal aid throughout the country. Dana, could you tell us about Tennessee’s online dispute resolution program for medical debt? What were the motivating forces that got the pilot off the ground and how does the service work to help people?

Dana Schmidt:

Yeah, our pilot allows the hospital and the patient, or it’s not always the patient, but what we call the guarantor. So it allows the hospital and the guarantor to attempt to settle medical debt without going to court. It’s also what we call pre-suit. So it’s an online and it offers the services of volunteer mediators. And the focus group is self-represented patients and or guarantors. So we officially kicked off the pilot in 2020 and of course with any kind of new pilot, we had to work the bugs out. So from approximately 2020 to 2022, we worked on building the online platform with our vendor and then tested quite a bit before we went live. And so we went live in 2022 and actually the hospital uploaded and settled cases 2022 and all of 2023, the motivating forces, number one I would say is the Supreme Court because these are cases that go through the court system.

The Supreme Court, which has its own access to Justice initiative, saw this as something that they thought was very important for the people in the state of Tennessee. And it was the issue that the court could address. And with that came a local court. We had the Hamilton County General Sessions court, which here’s all of the medical debt cases filed in Hamilton County and Tennessee, and we had a sponsor judge. And Alexander McVay has been a fabulous supporter of this pilot. And he is the, I think one of the main catalyst for this pilot overall. He came to the Supreme Court, he said, I’ve been talking with my colleagues and this is an issue in our court system. It’s bogging down our dockets. I’ve heard about these online debt resolution programs. Could we do it for medical debt? Is this something that’s out there? And then of course the Supreme Court became interested and you start really seeing the stats and you see how much medical debt is impacting the communities across Tennessee.

And so the next step was let’s find a hospital. And we found Erlanger Hospital in Chattanooga, Tennessee who is a charity hospital. And they listened to the pitch and were like, we’re on board. We want to try this, we want to do this. And then we sought out legal aid of East Tennessee to be the sponsor or representative for the debtors in the pilot to make sure that their rights needs were represented and so that we weren’t going to overlook something that we gave them a voice through legal aid of East Tennessee. And then of course, we have volunteer mediators at the state of Tennessee. We have an alternative dispute resolution commission appointed by the Supreme Court. And what the commission does is it oversees our regulated mediation training and credentialing program. And so we went to this, we have a whole pool of mediators and we said, we’re going to do this pilot, would you like to participate?

It’s 100% volunteer. And they said, absolutely. And so we have this group that came together since it’s literally been since 2019, and we built the pilot and we have a live platform that is utilized by Erlanger and they upload the cases and then they begin the online process. How does it help people? How is this helping the people in Hamilton County? Number one, it is a no cost service. It costs nothing. You get an email from the hospital that says, Hey, you’ve got a debt with us. We’d like to work it out. Would you like to participate? If so, here’s the link where you sign up for the platform. It’s pre-court collection, so you’re not worried about your case being filed with the court. You don’t have to deal with the court costs that are going to come along with this or anything like that.

My favorite part is it’s online and it’s available 24 7, so you don’t have to leave work like you do when you go to court. You don’t have to find a babysitter. You don’t have to try to figure out how you’re going to work this all in. You can do this on your phone, you can do it on your laptop, you can do it on your pc. It’s 24 7 accessible. And then it allows the debtor to take control of the debt issue and work directly with the staff who control the collection process. When you access this platform and you say, yes, I want to work with the hospital, you’re not working with a middleman. You are actually working with hospital staff who’ve been assigned the case and who will sit down and talk back and forth with you to figure out what works best. And because of that, what the hospital saw was they were getting more cooperation than the general regular debt collection process.

Ron Flagg:

Well, that’s great, and it sounds like a great model. It helps the courts, it helps the patients, and the hospital is concluded that it helps them. Hopefully our listeners out there are saying I want to do that. Is there a website or somebody a place where they can get more information about the program?

Dana Schmidt:

Absolutely. You can go to the Supreme Court’s website. It’s easy. You could Google State of Tennessee Supreme Court, you’ll come to the homepage and it’s under, we have a sub link called a DR Alternative Dispute Resolution. You click on that and it’s right there on the first page and it talks about the pilot, and it also gives links so that you can see test pages, so you can actually see what it looks like.

Ron Flagg:

Again, a terrific innovation and I hope others will explore the possibility of expanding it to their jurisdictions. Now we’ve just been talking, Dana’s been talking about a process for resolution before a lawsuit is filed. Matt, you and I both know that for every one of those, there are probably about a hundred thousand cases where lawsuits are filed across the country. What sort of options, Matt, do people have once there is a lawsuit against them? Is it too late to work with the hospital to make arrangements for alternative payment plans at that point?

Matt Keenan:

No, and as Dana was speaking, I was taking notes furiously because courts particularly coming out of covid are really embracing pilot projects of any kind. I think Covid forced the courts to accept novel approaches, innovation. Sometimes judges are the last party to embrace change, and I think it upset the apple cart and I think it forced them to embrace all kinds of technological innovations that otherwise would’ve taken decades. So I mean, as Dana was speaking, I think this is the kind of thing that Kansas should be looking into because really at the end of the day when you talk about community hospitals, I mean generally speaking, they’re good corporate citizens, they’re good community citizens. They are in the community because they care about the community. They want to make it better and stronger and healthier. I think it would be fair to say that the hospitals that we’re seeing suing their former patients are doing so as a last resort, and I think they would love to have other alternatives that they can show to their board, to their donors that they’re taking the high road.

So in my experience in this, and albeit limited, our presence is a total game changer and gives their attorneys, gives the hospital a chance to work out some program, something where they can get even a fraction of the loaf and feel like they’ve achieved, even if it’s a modest recovery of a bill, they’re doing something to help their bottom line. Because ultimately, even though they are nonprofit, that doesn’t mean they can’t be mindful of the P’s and Q’s in the bottom line ultimately. But yeah, I mean the small town attorneys are not going to be involved in these cases. And you take a county like Pratt, there’s the nearest KLS office is an hour and a half away. We have very limited resources there, but if they call the 800 number, more likely than not, we will help them because this is an area of priority for me, and we’ve learned that it’s like many of these civil legal aid cases, it doesn’t take a lot of effort for us to get in and make a significant change in the client’s life.

So we’ve had cases even where judgment has been entered and there have been garnishments, getting involved in a case like that can really change the playing field and allow the client to develop a more sensible workable payment plan, even as little as 10 to $15 a month. So yes, it’s really never too late, but if they don’t call us, obviously Ron knows there are limitations on our ability to solicit. They have to reach out to us and hopefully with the Wall Street Journal article and other news stories, there’ll be greater awareness that there are alternatives available to these men and women who are struggling with these bills.

Ron Flagg:

Well, thanks Matt, and that’s a great segue to my, really, my last question to both of you. When it comes to medical debt, the situation is worsened by the fact that many, maybe even most patients don’t know what options are available to them, whether it’s through dispute resolution, working with legal aid or applying for hospital programs for low income patients. So my final question to both of you, and we’ll start with Dana, is how can we reach people with this information before it’s too late to prevent serious consequences? Dana, what are your thoughts?

Dana Schmidt:

We talk about this now at the A OC and we talk about different ways to reach the community. One of the things we talked about is the A OC has the ability to run its own social media campaigns,

Ron Flagg:

And the A OC is the administrative office of the courts.

Dana Schmidt:

Yes, you’re right. The administrative office of the courts. We are the business side of the Supreme Court, and so for all its initiatives and commissions, the administrative office of the courts, we manage that for the Supreme Court. And so we talk about ways to get this out there. One of the things that we have that we’re lucky to have at this time is what we have a mobile legal office called the Justice Bus, and the Justice bus goes around the state of Tennessee and you can schedule the bus for free legal clinics, information, things like that. So that’s one of the ways we’re working to get this out as well. We just recently went to Virtual Justice Bus as well, because again, you can reach a lot more people virtually now, but one of the things too is just social media is something that we know gets the word out, and so we are working towards social media campaigns. We also have our partners, Tennessee Alliance for Legal Services is one, and then we have great relationships with all of our legal aid agencies across the state. So that is where you can get on the ground, boots on the ground and provide that information as well and get the word out.

Ron Flagg:

Matt, what can you do as Kansas Legal Services and legal aid generally across the country do to better educate people about the alternatives out there generally, which certainly is permissible under LSC regulations to provide education to people about their legal rights. What sort of activities in that regard do you try to do?

Matt Keenan:

Well, I think you have to go back to the pre covid days and just embrace good old fashioned engagement with the stakeholders in all of the communities that you serve. We talked about pilot projects. I think the flip side of that are these outreach clinics that we’ve had great success with on the expungement side, where we’ve had about 14 different expungement clinics all over the state. We roll in, we get really good visibility in the media and whatnot. But what I’ve heard other legal aid organizations doing are these consumer debt clinics, they have a similar concept. They go in, they’ll be there for two or three days and really get a great turnout in the communities for men and women who are struggling with these and other issues. As I go around the state, I do stop in, whether it’s Catholic Charities, I was in Pratt yesterday, there was an organization there called the Hope House where they deal with lots of these issues.

And I think there’s just still a lot of ignorance about the opportunities that families have available to him with these kinds of challenges. And it’s quite surprising because these rules have been in place since the Affordable Care Act, but still a lot of people that you think would be eligible aren’t. Part of it is the rules are the LA gray. They’re a little subjective, but I will tell you that if you look at a bill from a charity hospital, somewhere on that bill should include the three words, financial assistance policies, FAP. And I will tell you that the particular client that I helped in Pratt, that was nowhere on the bill, and it should be on the bill, it seems to me that’s the absolute minimum to make it publicly available. So we have to do more. I think our partners need to be more vigilant. We have a long way to go, but I know we’ll get there. And I think as we shake off the dust of covid and we do the old fashioned engagement, I think we’ll continue to make progress that there are remedies, there’s rights, and that people need to be aware of ’em. They need to find lawyers and they need to exercise

Ron Flagg:

Those. Thank you, Dana. Matt, thank you both for coming on the podcast to talk about the rapidly growing number of medical debt cases, and more importantly, thanks to both of you personally and to your organizations for the work you’re doing to resolve these suits more fairly and more in accord with the rights that are already on the books. Thanks to our listeners for tuning into this episode of Talk Justice. Please subscribe so you don’t miss an episode. In the meantime, stay well.

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